Black Friday’s hot retail numbers in November continued into the December holiday selling season, as the Same Store Sales Index registered a solid 5.1% gain, beating the final estimate of 3.8%. Excluding drug stores, the SSS index registered a 2.8% increase in December, beating its 2.5% final estimate.
The bulk of retailers beat, while only one missed its SSS estimates. The strong November retail sales momentum (the index showed an overall gain of 5.3%) carried over into December. Retailers also lowered their inventory orders this year to avoid the heavy discounting that can hurt margins.
Shoppers were in a buying mood, a sentiment in line with our Thomson Reuters Ipsos Consumer Outlook Index (TRIp) which indicates good feelings about 2015. As a result of stronger November and December SSS, analysts have been increasing projections for the fourth quarter. Our Quarterly Same Store Sales Index, which consists of 76 retailers, is expected to post 1.8% growth for Q4 (vs. 0.7% in Q4 2013).
Looking at individual store chains, Gap beat its 0.7% final estimate with a 1.0% result. As a result, the apparel retailers beat analyst expectations. However, the drug sector managed to post a positive surprise led by pharmacy sales at Walgreens, which received a boost from flu medicine sales.
The teen sector has been struggling for some time, but came back and posted its strongest 2014 SSS results. At Thomson Reuters, the sector is considered a good proxy of discretionary spending. Thus, its improvement again suggests consumers are feeling better about extending themselves.
Exhibit 1. Performance — Overall and Compared to Expectations
Sector strengths
Discount chains posted an overall gain of 2.9% SSS, just above the 2.8% final estimate. Costco beat its 2.8% estimate with a 3.0% SSS. Excluding gasoline sales, Costco’s SSS improves 8.0%, beating expectations of 6.8% SSS. Meanwhile, Fred’s is the only retailer that missed its 1.2% same store sales estimate, with a -1.4% comp.
The Apparel sector registered a 2.5% SSS in December, beating its final estimate of 1.9%. The Gap reported a 1.0% comp, slightly above its 0.7% estimate. Its Global division posted the biggest miss in our retail universe with a -5.0% comp, below its -2.9% estimate. However, its Old Navy Global division posted an outstanding 8.0% result. Meanwhile, Cato posted a big SSS beat, with a 6.0% SSS, above its 4.0% comp estimate.
After months of weakness, Teen Apparel posted a robust 4.6% SSS for December, above its 1.5% final estimate. The Buckle beat its final estimate of 0.1%, and reported a 2.5% comp. Likewise, Zumiez posted an 8.0% SSS gain, above its 3.9% final estimate.
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